OperationsDo the Math

Do the Math

With a tight economy and the market still in the recovery phase, hoteliers are seeking out ways to increase incremental revenue and impact the bottom line. Creating upgrades and offers for guests to take advantage of is a simple solution that can turn into big profits for hotels. And with advances in technology, analytic tools, and the increased potential of the mobile channel, upselling has never been easier.

Upselling refers to revenue potential that goes above and beyond a traditional guest booking. It could mean an upgrade to a suite or a room with a better view, a spa treatment offer, or a dining deal at the hotel’s on-site restaurant—all at a cost to the guest. With each offer, the hotel has the opportunity to give guests a valued service while increasing its profit margin.

“There’s no question that hotels leave a lot of money on the table if they don’t take advantage of upselling to guests,” says Bonnie Buckhiester, principal at Buckhiester Management, a consulting firm that specializes in revenue solutions for the hotel industry. “It’s not hard to do the math. It’s easy to identify the lost opportunities.”

Buckhiester, who has more than 30 years of experience in the travel and hospitality industry and acts as president of the International Society of Hospitality Consultants, explains that many hotels haven’t been consistent in increasing and utilizing upselling potential—and the potential is enormous. “We’re talking hundreds of thousands of dollars,” she says. “If you take an average size hotel in a downtown corridor, there’s no reason in the world they can’t have $400,000 or $500,000 of incremental revenue in a year. The ability to impact the bottom line is huge.”

The current trend in upselling is not only about presenting a guest with an upgrade or an offer, but also finding the offer that is right for that particular guest. Taking into account the nature and length of a guest’s stay, his or her past preferences and history, and how much that guest has been willing to spend in the past are all factors that can help a hotel take a more personalized approach to upselling.

“The more you know about your customers, and the more you use the analytics to predict what they’re likely to do or how they’re likely to react, the more revenue opportunities you can uncover,” says Kelly McGuire, executive director of hospitality and travel global practice at SAS, a company that specializes in business analytics and software.

Jason Bryant, president and chief operating officer of Nor1, agrees. Nor1 is a technology and software company that focuses on creating profitable upselling opportunities for hotels. “One-to-one marketing and personalization is nothing new. People have been envisioning that for some time,” he says. “The right vision needed to be matched up with the right approach, and then you needed to have the technical wherewithal to pull it off.”

Nor1 worked with Ph.D.-level statisticians and mathematicians to develop a centralized data system called Prime that makes real-time decisions whenever a hotel interacts with a guest. Upsell offers that are made to a guest take into account nearly 250 different variables—ranging from what that guest is likely to pay for an upgrade or service to the day of the week the offer is made.

“The price of the offer is really important, but when you make the offer is equally important,” Bryant says. “It’s about determining what that guest is interested in at that particular moment.”

It has become essential to keep upselling offers in line with a guest’s needs. For instance, Bryant explains that an upgrade at an airport hotel location may be a room with an airport view. Although in many cases this might not be an offer that many people would consider, travelers with kids have a propensity to book that room type so the children can see planes land and take off. If a business traveler is traveling alone and busy all day with events and meetings, an offer for a three-course meal for two probably wouldn’t make sense, but an offer for a relaxing spa treatment may result in a conversion.

“It’s about doing it in such a way that it doesn’t feel like an upsell,” McGuire says. “It’s a balancing act between keeping the guest happy and driving revenue and profits. You wouldn’t be in business if you couldn’t drive revenue, but you also wouldn’t be in business if you weren’t serving the guest properly.”

Upselling is often linked to email marketing with booking confirmation and pre-arrival correspondence, and at the front desk when a guest checks in. But more hoteliers and revenue management consultants are seeing the shift toward cellphones and mobile technology as the revenue generator of the future.

“Mobile is definitely a huge channel,” says Michael Davis, vice president of sales and marketing for RoomKey PMS, a property management system that currently helps hotels use email marketing to offer guests upgrades. “Sixty-eight percent of business travelers researched an upcoming trip on a mobile device. Seventy percent of them checked into a hotel or a flight or a cruise on a mobile device. It’s one of those channels that we know is creating incremental sales for hotels.”

Davis says his team is exploring ways to better utilize the prevalence of cellphones to market to guests. “Mobile is one of those things that has been coming forever,” he says, “and now it really seems to be here with the sophistication of the handsets.”
Mobile technology is making it possible for hotels to reach out to guests with offers throughout their stays, both on and off property. This equates to even more touch points for the industry and a wider berth of revenue potential for hotels.

“The industry has struggled in the past with how to communicate with a guest while on property,” Bryant says. “They’ve used kiosks and in-room televisions, but the prevalence of smartphones and iPods and iPads has really changed the opportunity to effectively communicate with a guest at any given moment.”

Despite advancements in online communication and mobile potential, a knowledgeable and trained front desk staff still has the potential to drive a large amount of incremental revenue for a hotel.

“The upselling phenomena is being completely transformed by technology, but, at the same time, there’s still opportunity right at the front desk,” Buckhiester says. “There’s no reason why salesmanship skills can’t be part of the traits of a good front desk person.”

Buckhiester believes that proper training, an incentive program, and a management team that recognizes front desk sales potential is the best way to maximize front desk upselling.

FrontDesk Upsell, which is part of the Nor1 platform, prompts front desk personnel with a sales script and a personalized offer through the hotel’s property management system (PMS) when a guest checks in. This scripted approach takes some of the guesswork out of the upselling equation and gives the staff more confidence when offering an upgrade.

“For front desk personnel, this isn’t like a hard sell—it’s not like a used car salesman,” Buckhiester says. “This is about providing options. Those options may or may not be of interest to a guest, but in many cases they are.”

When presented correctly, an upsell offer has the potential to not only generate incremental revenue for a hotel, but also improve a guest’s experience and turn him or her into a loyal, lifelong customer.

“I think that there is a larger opportunity here to use the upselling process to immediately have an impact on the guest experience,” Bryant says. “We’re allowing our partners to start having relevant communications with the guests immediately—to start building this chain of communication that gets successively more focused as we continue to learn about the guest and their preferences.”

For McGuire, the whole premise of cross-selling and upselling goes back to the basic principles of service and giving guests personalized attention that may make a trip more memorable.

“You can introduce guests to something they haven’t tried before. You can put them in a room type that makes the trip magical or special. You can offer them a restaurant experience or a spa treatment,” McGuire says. “There is that customer experience element, if you’re using the analytics in the right way, to make sure the offer is not only profitable to you but relevant to the customer.”